• Timothy

How I size my entry positions using simple Technical Analysis (An Introduction)

Buy! Buy! Buy!


These 3 words (or just one, really) have constantly been in my head throughout the last 2 weeks.


What a ride it has been so far!


The Dow Jones have officially entered the Bear Market (defined as prices of securities dropping by >20%). There's a price on Crude Oil. US of A is being hammered by COVID-19. UN has declared this a pandemic.


If there has been a time to sit up to monitor for buying opportunities, it is probably now.


As excited as we may be, there are two things that we need to be cognizant about:


  1. We have a limited warchest, and

  2. We don't know where (or when) the bottom will be


We need a strategy to make sure we do not fully expend our funds too early. It's okay to buy a wee bit too late, because everyone knows when the bottom has presented itself. The greater penalty is to buy too early, and not having enough funds available when the security prices dip even more.


So how do we size our positions?


For my own investments, I start to look at charts.


Wait, charts?


Yup.



'Okay so this looks like... Alfred Hitchcock's face while lying down. Is this a buy signal?'

My golden rule: fundamental analysis uncovers value, but technical analysis reveals price.

As much as I feel that some technical indicators can break down in a super volatile, fear-driven market, there are still some which I use to see where the market is headed toward.


In this upcoming mini-series, I hope to share some of the indicators I use to decide whether I should buy now or not, and if so, how much.

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